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Your Employer's Drug Plan Versus the New Medicare Benefit

If it hasn't happened already, you will soon be inundated with information about the new Medicare drug benefit, which goes into effect January 1, 2006. Companies began marketing their plans on October 15, and with all these sales pitches going on, you may feel pressured to sign up for a plan. But what if you already have drug coverage through an employer or union? The short answer: be careful!

If you are already covered by your company's retiree drug coverage, the Medicare plan may not be right for you. Don't signup until you compare your current plan with the Medicare plans available to you. Watch the mail for a letter from your company's plan, and if you don't receive a letter by November 15, 2005, contact your employer or union. The letter will state whether or not the company's coverage is "creditable"'”meaning it is equal to or better than what Medicare is offering. If it is "creditable," then you won't have to pay a late-enrollment penalty if you decide to switch to Medicare later. In other words, there's no rush and don't let a salesperson steamroll you into signing up for Medicare's benefit.

Even if your current coverage isn't "creditable," you still need to carefully consider your options. If you sign up for a Medicare drug plan, you will lose your company's retiree drug coverage, and reportedly about half the companies will cancel your medical insurance as well. Before you sign up ask your employer if you can drop your drug coverage without losing your other supplemental insurance. Once that insurance is gone, you may not be able to get it back.